In what is likely to be the defining theme of Leanne Wood's leadership of Plaid Cymru, she said:

Today, we're making a clear statement of our intent – that Plaid Cymru, the Party of Wales, links its own success with the economic success of the Welsh nation.

If achieving cultural self-confidence was the priority for the last century, then achieving economic self-confidence is the objective for the 21st Century.

So this introductory report from Plaid's new Economic Commission, co-chaired by Eurfyl ap Gwilym and Adam Price, will set the scene for the work it has to do. Click the images below to download it in either Welsh or English.

This is what Adam Price had to say about it:

Offa's Gap, the commission's initial report, makes for very stark reading. It is a sobering analysis of how Wales' economy has suffered because of its status within the UK over the past decades.

The first step in solving any problem is establishing its nature and its scale. Our commission's initial report does exactly this; acknowledging the economic realities that Wales' economy faces today.

With the launch of this report we are inviting everyone in Wales to participate in this essential process of discovering together the ideas and strategies that will offer our country a better economic future. There can be no monopoly on good ideas in this regard. Indeed only by pooling our intelligence can we hope to begin the task of charting a different course.

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comments:

Anonymous
said...

It's a very interesting report and shows how the decline of Wales' economy is masked by GDHI and wage levels etc being relatively consistent with the UK as a whole.

Interesting that its three recommendations at the end hint towards:- Creating a body that could prioritise inward investment and getting Wales' business exporting (sounds like a call for a WDA style body).- Prioritising East-West transport links. This seems like a dose of realism to me.- Capitalising on England's public sector reforms.

Would be very interested to hear your thoughts on this MH? All three of those seem like a departure from previous Plaid policies.

How can we go about setting up not for dividend (possibly social enterprise) companies to bid for privatised services in England? There is a high entry threshold to companies wanting to submit tenders, in terms of capital, experience and other factors, which means that only companies that have consistently failed (like G4S and Capita) get past the first hurdle. I'm sure we can address that, but how?

This is a superb piece of work, and a credit to Adam, although the solutions aren't there yet. Nobody has yet put Wales' modern economic history together in such a way in a single document. I also found it relatively easy to understand because he doesn't write that academically.

It shows that we cannot adopt black and white views. We are dealing with complex and strange problems. The decline in the Welsh economy predates devolution, for example.

And there is no option to be like Jersey, or Man, or Scotland, or x y or z. We will have to be like Wales and think of Welsh solutions.

I want to see the other parties catching up with Plaid on this and producing their own analyses. But then, they don't have to, do they?

We should be careful to note that this is an initial report, and not Plaid policy. It might become Plaid policy, or aspects of it might, but let's not jump the gun. It's a discussion paper, or "discussio" paper, if you prefer to omit the final letter ;-)

What struck me most was the heavy emphasis on exporting. That seems to follow from Adam's previous paper, the Flotilla Effect, where he made the point that small countries tend to do better because they do not have a large internal market; and therefore develop a mentality of trade and export with other countries which stands them in much better stead than a country that relies more on its internal market.

According to the analysis in this paper, Wales relies on exporting rather than its internal market to a much greater extent than England. That's fair comment. However it strikes me that part of the reason for that is probably transport links, for it is physically easier to get goods to England than it is to get them to other parts of Wales.

Therefore, and in answer to Anon 19:12's direct questions, I wonder if the conclusion that we should be "prioritizing East-West transport links" is in fact valid. It is undoubtedly easier to trade within your own internal market than to export and buy from other markets. That's why bigger countries do it. So I might be inclined to draw exactly the opposite conclusion: that we could get more "bang for our buck" by improving our internal transport infrastructure, as this would make it easier for people and businesses in north or mid Wales to buy from and sell to south Wales rather than (as is currently the case) tending to do it with north west England and the Midlands.

I've got nothing against west-east links, of course. I just don't want to put all emphasis on them at the expense of improving our internal transport links. Nor are they mutually exclusive. With better links to the north and south as well as to the east, mid Wales would become an ideal central location for companies that could sell their products easily to all parts of Wales and to England. Win-win.

In relation to a "WDA style body", it would again be worth noting that the report says, "Wales needs a dedicated arms-length business-friendly agency working to attract export-oriented investment and support and encourage indigenous-based exporters." It would be a mistake to emphasize the first part at the expense of the second.

I could argue that the apparent success of the WDA might have masked the long term weakening effect it had on the Welsh economy. By that I mean that politicians put undue emphasis on foreign companies themselves setting up factories here, and thus took their eye off the ball of home-grown companies. The WDA succeeded because Welsh labour was among the cheapest in the EU as it existed at that time ... but with EU expansion, those foreign companies closed up and set up factories in those member states where labour was even cheaper, leaving us in the lurch. Those foreign companies, by and large, had no reason to invest in Wales because it is Wales, but only because we were cheap. With hindsight, putting more effort into fostering home-grown companies would have had better long term returns because of their commitment to Wales as a country, and communities in Wales, rather than Wales as a place of cheap labour.

I certainly won't argue against Wales needing investment in business, or in export-orientated business. But I would question the nature of that investment. I would prefer to see more 50%-50% investment, so that rather than rely on a foreign multinational to set up in Wales on their own, we encourage joint enterprises with home-grown businesses. Once set up, there's a much better chance these will stay in Wales.

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As for capitalizing on England's privatization policies, I have no problem with that at all. Quite the contrary. Another hackneyed Tory cliché (almost on a par with this one) is that the private sector creates wealth, and the public sector spends it. It's complete rubbish. Why does a teacher in the public sector suddenly "create wealth" if the school he teaches in is privatized? Why does a doctor in the public sector suddenly "create wealth" if the hospital she works in is privatized?

There is no reason why public sector services and industries cannot create every bit as much wealth as privatized ones. In fact, we could argue the opposite is true: that without wasteful, destructive competition and without the imperative to syphon-off profits to shareholders, a well run public sector operation will tend to offer better value for money (and far more accountability) than any private sector operation could.

It's common practice in Europe for public sector companies to make money elsewhere. This report mentions the Norwegian-owned Statkraft and Swedish state-owned Vattenfall, and I myself have pointed to the fact that Bavaria's Stadtwerke München will rake in 30% of the considerable profits that will be made from Gwynt y Môr.

Well said MH. The decline of public sector companies in the UK is a massive tragedy. I remember them being very inefficient ad poorly run, but this was taken too much to heart and exploited by a very determined Thatcher government. I hope in Wales we can develop leaner, meaner state or semi-state companies that can bring some cash into the Welsh coffers.

The scale of this challenge is vast. Wales needs a massive amount of investment not just in infrastructure but in skills and education spending, and for it to be spent effectively. Under the UK Government's current austerity policies Wales will probably go backwards faster than the UK. Plaid Cymru needs to turn this around.

On transport, the Holtham report noted that half the Welsh population lives within 25 miles of England and there are 4.9 million English people within the same distance of the Welsh border. Wales as a whole has only 3 million people and most of the country is sparsely populated with difficult topography. It's no surprise therefore that major traffic movement is east-west rather than north-south. This has been a defining fact of Welsh economic life since the time of the drovers, and always will be: even if you built a motorway along the route of the A470, the principal flows of people and goods along the north and south Wales corridors wouldn't change.

I also feel there's a danger of a sterile private versus public debate here. Of course, there is an important role for the public sector in the economy and in the provision of public services - the market is not good at delivering everything needed in society. Ultimately however, you have to ask the question whether you want a market economy or not.

If you do, then you have to accept the large economic literature that shows how productivity growth is higher in industries that face market competition. The creation and destruction of firms is a Darwinian process which drives out less efficient companies and puts pressure on firms to innovate and improve. I think Schumpeter called it "creative destruction". Productivity in the old nationalised British industries was poor and management decisions were often made for political rather than economic reasons. For example, Ravenscraig was probably never a viable site for a steel plant. The danger of relying too much on a new generation of state enterprises is that you'll forget these lessons and create inefficient operations, protected from competition and dependent on subsidies - money that you could be better spending elsewhere.

I disagree with you entirely on transport links, Anon. Improving north-south transport links would radically change the way Wales works. It would open up an entirely new dimension for trade. I don't think it would reduce the west-east flows, but I don't want it to. Better links in all directions will make it viable to set up businesses in parts of Wales that badly need it, and open up new, easier-to-reach markets for Welsh companies that already exist.

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I have to say that your black-and-white "having a market economy or not" is rather over-dramatic. It's not an either-or choice. To me, it looks like your position has more to do with a particular ideology than the way things work.

Anyway, the specific question was the extent to which publicly-owned enterprises (and it's worth noting that there is more than one model) could or would be able to compete in the market place created by privatization in England. Whether in health, education, energy or any other field, success will entirely depend on competitiveness. We won't win those contracts unless what we offer is better than what our competitors offer.

MH, there may be a 'nation building' rationale for improving north-south connectivity but there isn't a major economic one. If you look at chart 4.6 in the Holtham report you can see how most people and goods move between larger settlements along the east-west corridors in the north and south. Few people live in the space between and hence there is little traffic. I remember the analysis for one of the old WAG transport strategies showing how there are only a handful of daily journeys starting in south Wales and ending in the north, or vice versa. A regular long journey from south to north may be a fact of life in the Welsh public sector or national cultural organisations, but in economic terms it's simply too far to reach too few people.

Aside from localised safety improvements, such as passing places on some stretches of the A470 or a few bypasses - e.g. at Newtown - I fail to see how major investment on north-south routes can be justified. We could build major new roads but they would be white elephants; we could subsidise new rail routes but they'd be heavily loss-making. Remember that an independent or fiscally autonomous Wales would have to make some extremely tough choices about public spending!

You're right that the success of publicly-owned enterprises in English markets will depend on their competitiveness. But I'm sceptical - I don't think the 'core competency' of Government lies is setting up international outsourcing companies. Besides, one of the traditional concerns in Wales is that we don't have a sufficiently entrepreneurial culture or a high enough business birth rate. This idea seems to risk the further 'crowding out' of enterprise that might be better done in the private sector.

It is worth pointing out Wales already has a market economy. 3 quarters of us that work do so in the private sector, mostly for low wages. I think France, to a lesser extent Germany, are also market economies but have state enterprises investing here. We are doing nothing of the sort. I also think modern state companies would not look like old nationalisation on the British model. Usually it's just a Government-owned stake and the management is independent. Alot of the preference for state activity in Wales isn't ideological, its borne of the fact that solutions from the private sector are slow to emerge, although we desperately need them.

When the new WDA is set up, it should concentrate on attracting hi skill jobs with R&D. In fact, working with universities it could create an R&D sector that would itself act as a magnet for high-tech businesses. It was definitely a mistake to do away with the 'brand' of the WDA - and indeed the Wales Tourist Board - both of which had become known all over the world. However, they were both in need of a radical overhaul of how they worked and accountability. The bonfire of the quangos really was a bit of a foot shooting event.

And on tourism, we should be seeking to attract the high value tourists, an not the cheap and cheerful 'week in a caravan park' sort. Our scenery has intrinsic value, and we should charge for its enjoyment in the form of a tourist tax. Other countries like Switzerland do it. We should.

I want to correct the idea that north-south transport improvments are about "nation building", Anon, if you mean that it is something to be done for symbolic rather than practical economic reasons.

I've heard your argument many times from many people. Essentially it is to accept the infrastructure that we have as a "given", and just improve it whenever it shows signs of strain. That will not change Wales. Present flows are not what matter, enabling a different future is what matters. What if I used your argument to say that there were only a handful of journeys between Newport and Bristol? It's true. Before the 60s there were only a handful, but building the Severn Bridge transformed the potential for trade between south east Wales and south west England. And the same was true of the railways before that. Many towns that were backwaters grew and prospered simply because of the potential for trade brought about by better transport links.

MH, you're misrepresenting me. I'm completely in favour of infrastructure improvements - *in the right places*. As the Eddington Review concluded a few years back, "Government should prioritise action on those parts of the system where networks are critical in supporting economic growth". That means tackling pinch points, ensuring good connections between major settlements and reliable access for Welsh businesses to their markets in England and beyond.

But there is no point in building a high-speed railway line, a six-lane motorway, or even a dual carriageway, between Cardiff and Bangor (population 15,000) by way of places such as Llandrindod (population 5,000). The demand isn't there to justify the capacity. The demand never will be.

The analogy with the M4 is false. Newport and Bristol were significant population and industrial centres only 40 miles apart. When freight, and eventually people, started shifting from rail to road there was always going to be a need for a major new route. Plans for the motorway started as early as the 1930s.

As for your implication that places such as Llandrindod could grow into major new commercial hubs, if it they had better transport - (a) I doubt it, and (b) would you really want that? In the 1960s planners wanted to establish a New Town in Mid Wales. They pulled back in the face of local opposition on environmental and cultural grounds.

As well as growing our exporting economy we need to develop our internal market - the both go hand in hand. When I see the success of Jersey Royal potatoes I know that the exact same potatoes are grown in Pembrokeshire - yet they are not sold at a premium in the supermarkets, and for that matter not greatly in the markets in Wales. If they could up their game and rebrand as a luxury up market product they could be onto a winner, but only if they are marketed and sold collectively, and for that we need a marketing strategy and cooperative working, together with decent internal infrastructure.

Anon 15:53 - nobody's talking of motorways north -south, a decent straight road with some overtaking stretches would be fine.

The other point about North-South links is that it would help keep some income circulating within Wales rather than going outside. Improvements on the A487 which goes from Fishguard to Bangor would mean people and companies, say in Aberystwyth, will use services supplied by businesses in say Aberteifi or Porthmadog rather than the Telford etc.

On the A470 it means people in Builth shopping in Cardiff not Shresbury or B'ham and alternatively, people from Cardiff going to Builth to recriation or holiday.

There's also the other issue that for many people and business it's not a North-South road, but rather a road which goes north or south - that is, it's helps their local 20 mile trip. In the same way I use the M4 very often - not to go to London but to go between Cardiff and Bridgent - it's a local road not a 'motorway' for me.

I'm not misrepresenting you at all, Anon. I'm saying that your view of "in the right places" is too narrow. You can't see the difference between what is and what could be.

In fact, Newport and Bristol used to be over 70 miles apart by road via Gloucester. There was no natural pattern of trade between them; they looked in other directions. But when the journey was reduced to 20 miles with the Severn Bridge it allowed new trade opportunities to open up.

And yes, if you're asking whether I want small towns in places like mid and west Wales to grow into prosperous commercial centres, of course I do. But providing the infrastructure that will allow such towns to become more prosperous is a very different thing from planting a brand new town in the middle of Wales.

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Agree with Cibwr, Penddu and M. M's second and third paragraphs are spot on.

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On the subject of road infrastructure generally, I think we need to be more far-sighted than we are now. For example, the new Caernarfon bypass is a good idea. But it is going to be built as a three lane single carriageway, and it strikes me that at comparatively little additional financial cost, and virtually no additional environmental cost, it could be built as a dual carriageway. Haven't we learned the lesson on the Heads of the Valleys road, that this sort of road is inherently dangerous no matter how many white lines we paint on it? If we upgrade it later, it will be twice as much work.

The dualling of the Heads of the Valleys is very important, and completion has been long overdue; but it is in hand and will eventually be done. I think it will provide an alternative to the M4 from industrial south Wales to the midlands and north of England, and will reduce the pressure on the M4 making upgrading it less of a priority. I do not think it needs widening, or that a new parallel route needs to be created. But I do think that the SDR should be improved, and this is what Ieuan had in mind when he said no to the new motorway.

As for the north-south routes, I think the approach should be to first work out what we eventually want the network to look like. I think we probably do need a dual carriageway most of the way from north to south. We should design it, and then put in place a rolling programme to implement it, even if it will take twenty or thirty years to complete. What concerns me is that we will make minor improvements at the worst pinch points, but eventually build a section of new route that by-passes the pinch point and the improvements to the pinch point. The money spent on the intermediate improvements will then have been wasted.

As I said in a previous comment, I do not object to *localised* improvement on north-south routes where safety and local benefits suggest it could be worthwhile. I pointed to the Newtown bypass as an example. But the notion of a major new north-south Wales highway as a 'transformative' piece of economic infrastructure is fanciful.

MH, the M4 was built to link industrial South Wales to London and the Midlands: the facilitation of trade & commuting between Newport and Bristol was secondary, assuming planners even considered it at all. The London - South Wales route has been strategically important since the days of the mail coach to Milford Haven in the 1820s.

But yes, the motorway did indeed stimulate trade and commuting in the Severnside region. Critically, however, you missed my point that these were (and are) *major population centres*, within relatively close proximity 'as the crow flies'.

In contrast, there are no major towns or cities in mid or north Wales. Apologies to Wrexham, but this - the largest town in the north - had a population of only 43,000 in 2001 (these are ONS urban area stats, not figures for local authority districts). Llandudno and Bangor both had around 15,000 residents, Aberystwyth 16,000, Newtown 10,000; most of the other settlements are essentially large villages.

There is thus no demand, no demographic or economic mass to justify a new dual carriageway stretching from north to south Wales, which would probably cost billions of pounds.

Be careful not to say the same thing over and over again, Anon. It doesn't become any more valid.

You say there no big towns in mid and north Wales as if it was news. But let me put this to you: what justifies the A55? Only the ferry from Holyhead. But we could just as easily have developed the A5 as the main way to get to Holyhead and, if we had, Llangollen, Corwen and Betws would be major commercial centres.

But the traffic using the ferry is relatively minor. The bulk of the traffic on the A55 is people using it just because it is there, they are taking advantage of it for commercial (and other) purposes because it is easier to do business if you're based close to such a route.

One of the things what we might broadly call the Green lobby (and I'm part of it) has got right is that that if you build or increase the capacity of a road, it quickly fills up. That is usually a bad thing, because if you're talking about capacity issues, you do nothing more than move the problem a few miles further on. But it can be a very good thing in areas where we want to increase economic prosperity.

There's nothing wrong with localized improvements, I'm not criticizing you for that ... except to point out that one little improvement after another after another can sometimes cost more than a more radical solution. I simply want people not to be tied down to such a narrow vision, and look at the bigger picture too. The way we plan things can have a transformative effect on the economy. We need to look beyond the Wales we've got to the Wales we want.

Happy to re-post including the relevant links, and apologies for not including them earlier. I'm not sure if you needed to delete the whole thing though, I would have just put the links in a new post?

"MH, if I was being repetitive it's only because I feared that you didn't understand my argument.

It's plausible to argue, as you do, that increased road capacity can encourage traffic (Say's Law, basically). Ultimately however, only a finite number of people are going to want to make any given journey. That's why the M50 remains relatively quiet and Ross-on-Wye hasn't catapulted up the urban hierarchy, despite being served by one of Britain's first motorways.

WAG commissioned a study into the economic effects of road improvements a few years ago; I dimly recalled that the conclusions were quite interesting, so I looked it up again. The authors found that roads tend to impact the *location* more than the *level* of economic activity: "there is little or no evidence… of net economic gains at the sub-regional level".

This suggests that we need to be even more cautious about how and where we invest in new roads. As I said previously, the last Labour Government commissioned Eddington to look into these issues and I thought his conclusions were pretty reasonable."

Sorry, I forgot to add my prior comments in reference to your point about the A5 and A55. Basically, I think your argument chimes with the findings in the WAG study - i.e. that new roads tend to impact the *location* more than the *level* of economic activity. It's plausible that Betws-y-Coed and Corwen could have lost out on economic development - relatively speaking - to places on the A55 corridor once the latter was improved into the main east-west route in North Wales.

Anon's petty little griping get us nowhere. If we are to transform Wales we have to think big, and not be constrained by those who would see us going backwards.

Here we have a clear statement from a party that has its sights on government. It is supported by a piece of work that puts anything the current Welsh government could even imagine doing into the TWP corner.

The report is a work in progress, as it should be, but at least there is progress, which is more than we have seen from the moribund Labour phalanx in 13 years!

Play the ball not the man, Sionnyn. Far from "petty griping", I made some serious points backed by research evidence.

It's easy to 'think big' in the comments section of a blog. But if you want to transform Wales in the real world you have to face up to the fact that politics and economics involves hard choices. Some of the things you'd like to see aren't going to be achievable, affordable or even effective.

I'm not complaining about the Offa's Gap report in general. It's a pretty impressive diagnosis, though I've seen a lot of similar analysis in other places before. Check out Nicholas Craft's Juilan Hodge lecture on 'Productivity at the Periphery' or the old WAG economic development strategy, 'Wales: A Vibrant Economy'.

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